1) Field of the Invention
The present invention relates to a method and system for providing enterprise management and bundling of perishable inventory which varies in value over its life and is susceptible to value-based pricing to achieve maximum revenue. More specifically, the present invention maximizes revenue of perishable inventory such as television (TV), radio and outdoor advertisements and entertainment industry events using multiple variables in inventory control and optionally pricing fuzzy logic algorithms to create scenario plans which present the most profitable bundling of offerings and which meet the customer's needs.
2) Discussion of Related Art
Inventory or revenue management systems and methods have been in existence at least since the early 1980's when the airline and car rental industries began adopting revenue management as a regular business practice, the history of which is provided in Robert Gross, Revenue Management—Hard-Core Tactics for Market Domination, Broadway Books, New York 1997, herein incorporated by reference. The basic premise is that revenue can be increased by managing the yield from inventory. Yield management is the practice of maximizing profits from the sale of a perishable inventory, such as advertising time, airline seats, cruise berths, rental cars, hotel rooms, etc., through the systematic use of historical purchasing information, pricing and inventory controls and customer service improvements. A yield management program reveals demand for a product that was formerly not apparent and manages this demand to maximize revenues.
Yield management concepts apply to many industries which are susceptible to value-based pricing. When different sets of potential recurring customers value a product or service differently, a yield management system introduces a pricing structure which provides that product to customers at a price consistent with their individual evaluation or price sensitivity. By designing products that meet the specific needs of potential customers and charging multiple prices, this value-based pricing increases the customer base and profits from sales. Yield management not only works to identify appropriate locations for discounting prices in order to increase sales, but also to identify opportunities to increase the price as well. Ideally, when the profitability of inventory sales varies, product availability must be controlled so that the product is not sold out too early, or left unsold at its expiration date (e.g., air time, travel time or other time of performance).
Previously, informal yield inventory management systems operated by the intuition of managers who had sufficient experience and confidence to make decisions as to who to sell to, when to sell and at what price. However, such approaches were haphazard at best, and the actual yield largely depended upon the talent of individuals who were managing the inventory, their stability and experience.
More recently, inventory management has utilized increasing capabilities of computer technology. However, existing automated systems tend to follow simple two-dimensional pricing models for local markets. For instance, U.S. Pat. No. 6,061,691 to Fox discloses a method and system for inventory management which includes a yield management system, a price forecasting system, and a traffic billing system. An inventory item such as available advertising time associated with a specific time period or program is presented to a customer together with a price quotation. The price quotation is generated using the price forecasting system and by a pricing strategy in the yield management system. When the customer requests a specific inventory item, it is placed into a traffic billing system and that inventory item is removed from inventory. The Fox patent also follows the conventional practice of accounting for reservations of advertising time, which are not closed sales but rather requests that a particular advertising time be held for a customer. A weight representing a probability of close is assigned to the reservation for utilization in the yield management and price forecasting systems.
The price forecasting system disclosed in the Fox patent is updated with the changed inventory or reservation before the next customer makes a request, instead of using batch processing of this information, such that the information effects price quotes from the price forecasting system before the next customer request. Such a system is computationally intense and probably not suitable for a large enterprise system.
In these types of inventory management systems, the yield management system uses simple availability curves as pricing models wherein the rate at which advertising time is sold is based on the availability of a fixed amount of advertising time and the proximity the request is to the inventory item expiring (e.g., airtime). Generally speaking, the closer to the time an advertisement is to be aired or the more urgent the request, the higher the price the advertising time can be since the potential customer values the air time to a greater extent than a customer who is planning ahead. This concept has long been used in the airline industry, wherein the last minute business traveler is charged a greater rate than an incidental tourist planning ahead. Simple two-dimensional sample demand curves are illustrated by two-dimensional graphs, the starting point of which and the number of units being determined in advance by management.
While these simple demand curves can prove adequate for many applications such as serving local markets, it does not take into consideration other factors that could greatly influence and improve the customer's experience while maximizing monetary yield from the inventory. Information beyond mere demand curves and available inventory might be important in a customer's decision. The gathering of the appropriate information is left to the talent and experience of the selling agent or even the customer him or herself in these preexisting systems. For instance, a customer may want to know the Arbitron® ratings of various radio shows, and the potential frequency an advertisement might be heard by an individual listener and the number of people by whom the advertisement is heard. This information typically comes from the selling agent, but an individual agent can only know, gather and/or keep up-to-date on so much information and generally only about a single local market.
Also, these conventional systems presuppose a fixed amount of advertising time as its total inventory for a time period, and pricing is the single major variable used to maximize revenue. In fact, some commentators have indicated that adding units is not appropriate at all, let alone on a dynamic basis in reaction to demand. See, Fox, Pricing and Inventory Management in Today's Broadcast Environment, National Association of Broadcasters, 1997, pp. 30-31.
These conventional systems, because they depend on the skills and knowledge of a selling agent, tend not to be suitable for an enterprise made up of a number of business units in the same and/or different markets or for customers desiring to reach multiple markets.
Additionally, these systems can be subject to input “noise” due to managers and the like accumulating orders before entry into the traffic system. If accommodations are not made, these apparent sharp rises in unit selling rate can lead to a false impression of high or increased demand for a given set of inventory items. For instance, if a manager enters the orders accumulated over a week's time on a Friday, the price forecasting system may view Friday's traffic as a large increase in demand for the type of inventory sold and increase prices beyond what the market will accept.